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Introduction

This booklet is a guide to winding up your limited liability partnership or removing it from the register. The booklet summarises some of the rules that apply to voluntary arrangements, administration orders, receivers, and voluntary and compulsory liquidations. It also covers how and why limited liability partnerships are struck off and dissolved.

This booklet also covers how, in certain circumstances, your limited liability partnership may be restored to the register.

Please remember that if your limited liability partnership is considering liquidation, or any other measures to deal with insolvency, you should seek appropriate professional advice or consult an authorised insolvency practitioner.

You will find the relevant law in the Limited Liability Partnerships Act 2000, the Insolvency Rules 1986, and in the Limited Liability Partnerships Regulations 2001 which apply parts of the Companies Act 1985 (as amended in 1989 and later) and the Insolvency Act 1986 to limited liability partnerships.

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CHAPTER 1

General insolvency information

1. What are insolvency proceedings?

These are formal measures to deal with debts of limited liability partnerships. Many different types of insolvency proceedings apply to limited liability partnerships. All are covered in this booklet.

2. Do all limited liability partnerships have to go through insolvency proceedings before being dissolved?

No. If the Registrar has reason to believe that a limited liability partnership is not carrying on business or is not in operation, he may strike its name off the register and dissolve it without going through liquidation. A limited liability partnership that is not trading may apply to the Registrar to be struck off the register. This procedure is not an alternative to formal insolvency proceedings.

More information about striking off and dissolution of a limited liability partnership is given in chapter 7 of this booklet.

3. Can anyone supervise insolvency procedures?

All liquidators, administrators, administrative receivers and supervisors taking office on or after 29 December 1986 must be authorised insolvency practitioners.

Receiver managers and Law of Property Act (LPA) receivers do not have to be authorised.

Insolvency practitioners may be authorised by:

4. What happens to the members of an insolvent limited liability partnership?

The liquidator, administrative receiver, administrator or Official Receiver has a duty to send the Secretary of State a report on the conduct of all members who were in office in the last three years of the limited liability partnership's trading. The Secretary of State has to decide whether it is in the public interest to seek a disqualification order against a member.

Examples of the most commonly reported conduct might include:

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CHAPTER 2

Voluntary arrangements

1. What is a voluntary arrangement?

A voluntary arrangement is when a limited liability partnership makes an agreement with its creditors by proposing a 'composition in satisfaction of its debt' or a 'scheme of arrangement of its affairs'. This means an arrangement, approved by the court, in which the limited liability partnership has formally agreed terms with its creditors for the settlement of its debts.

2. Who may propose a voluntary arrangement?

A voluntary arrangement may be proposed by:

3. Who considers the proposal?

When the limited liability partnership has proposed the arrangement, the nominee appointed to supervise its implementation reports to the court within 28 days on whether, in his or her opinion, a meeting of the creditors should be called. When the administrator or liquidator proposes the agreement, the nominee reports on whether a meeting of the members and a meeting of the creditors of the limited liability partnership should be called.

4. How is a proposed voluntary arrangement approved?

The meeting summoned by the nominee decides whether to approve the voluntary arrangement which, subject to certain restrictions, may be approved with or without modifications. Any modifications must be agreed with the limited liability partnership. It is then binding on all creditors who had notice of the meeting and were entitled to vote. All creditors who had notice of the meeting are bound by the terms of the arrangement.

5. What happens when the arrangement is approved?

If the meeting of creditors approves a voluntary arrangement, then the nominee or his replacement becomes the supervisor of the arrangement.

6. What needs to be sent to Companies House?

The supervisor must send a copy of the chairman's report of the meeting.

At least once every 12 months, the supervisor must send an account of receipts and payments, together with a progress report, to all interested parties including the Registrar.

When the arrangement is completed, the supervisor must notify the Registrar, within 28 days after final completion. If the arrangement is suspended or revoked, the Registrar must be notified.

3. What is the effect of the order?

While an administration order is in force, the limited liability partnership cannot be wound up and an administrative receiver cannot be appointed or, if previously appointed, they must vacate office. There are restrictions on enforcing any security over the limited liability partnership's property, selling any goods and starting any legal proceedings. More details about receivers are given in chapter 4.

4. When may a court make an administration order?

A court may make an administration order when the limited liability partnership is, or is likely to become, unable to pay its debts and the court considers that the making of an administration order could achieve one of the purposes outlined above.

5. Who may make a petition for an administration order?

This may be done by the limited liability partnership itself, or one or more of its creditors including any contingent (existing) or prospective creditors. The administrator appointed by the order must notify the Registrar of the order.

6.Who must an administrator notify of his or her appointment?

An administrator must:

7. What are the administrator's duties?

The administrator takes control of all the property to which the limited liability partnership is, or appears to be, entitled. He or she prepares proposals for achieving the purpose for which the administration order was made and calls a meeting of creditors to consider those proposals. If the majority of creditors approve the proposals, the administrator then manages the affairs, business and property of the limited liability partnership in accordance with the proposals.

8. Does the administrator need to send anything else to Companies House?

Yes. The administrator must send details of the proposals within three months after the order was made. Then, every six months, the administrator must send an account of receipts and payments.

9. How long does an administration order last?

It continues until the court discharges it - in other words, decides that the order is no longer needed. If there is a court order to discharge the order, or to vary its terms, the administrator must send a copy to the Registrar within 14 days after the order was made.

10. Which forms should be used?

The appropriate forms are:

 

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CHAPTER 4

Receivers

1. What is a receiver?

There are many different kinds of receiver and their powers vary according to the terms of their appointment.

An administrative receiver is a receiver or manager of the whole, or substantially the whole, of a limited liability partnership's property who is appointed by or on behalf of the holders of any debentures of the limited liability partnership secured by a floating charge. He or she has the power to sell (or otherwise realise) the assets covered by the floating charge and apply the proceeds to the debt owed to the charge-holder.

Receivers who are not administrative receivers may be appointed in other circumstances. For example, under powers contained in an instrument or document creating a charge over a limited liability partnership's property, a receiver or manager may be appointed until the debt is recovered. Receivers may also be appointed under the Law of Property Act 1925.

2. Who gives notice of the receiver's appointment?

The person who appoints the administrative receiver, receiver or manager, or has them appointed under the powers contained in an instrument, is responsible for informing the Registrar within seven days of the appointment. An administrative receiver must also publish notice of his or her appointment in the Gazette and in an appropriate newspaper.

When the administrative receiver, receiver or manager ceases to act they must notify the Registrar.

3. What must the receiver send to Companies House?

Within three months of appointment, an administrative receiver must make a report to all of the following:

The report must explain the circumstances of the appointment and the action the administrative receiver is taking. The report must also include a summary of any 'statement of affairs' prepared for the receiver by the officers or employees of the limited liability partnership.

All receivers must send an account of receipts and payments for the first 12 months of receivership to the Registrar, and:

1. When can a limited liability partnership go into MVL?

This can take place when the designated members believe that the limited liability partnership is solvent.

2. What is in the declaration?

The statutory declaration will state that the designated members have made a full inquiry into the limited liability partnership's affairs and that, having done so, they believe that it will be able to pay its debts in full within 12 months from the start of the winding-up. The declaration will include a statement of the limited liability partnership's assets and liabilities as at the latest practicable date before making the declaration.

3. When does liquidation actually start?

The liquidation starts when the members determine to wind up the limited liability partnership. The means of making such a determination will usually be provided for in the partnership agreement. In the absence of any provision, the determination will be made by a decision of the majority of members.

4. Must notice of voluntary liquidation be given to anyone?

Yes. Notice of the determination for voluntary winding-up of the limited liability partnership must be published in the Gazette within 14 days of the making of the determination. The limited liability partnership must also send a copy of the declaration and the determination to the Registrar within 15 days of the date when the limited liability partnership determined that it would be wound up.

5. When may a CVL be appropriate?

A limited liability partnership may go into CVL when it cannot pay its debts.

6. What must the limited liability partnership do?

Its members determine that the limited liability partnership cannot continue in business because of its liabilities and that it is advisable to wind up. The way in which the limited liability partnership makes such a determination will usually be provided for in the partnership agreement. In the absence of any provision, the determination will be made by a decision of the majority of members.

The determination must be:

A meeting of creditors must be held in the next 14 days after the determination to wind up has been made. Notice of the meeting must be sent to the creditors at least seven days before the meeting. Also, the designated members must prepare a statement of affairs for consideration at the meeting, and appoint one of themselves to attend and preside over the meeting.

When the liquidator is appointed, the designated members must provide him or he